Seattle Office Maintains Values, But Trades Are Few

Although 2024 was a tough year for most local economies with significant office inventories, Seattle’s office sector gained significant momentum. Office completions increased by more than a third compared to the previous year, reaching a total of 4 million square feet, CommercialEdge data shows.

Additionally, the metro logged $599 million in office sales last year. This figure represents a considerable increase, nearly doubling the amount registered in 2023, but still the lowest investment volume among gateway markets.

The city also strengthened its position as one of the most active life sciences markets across the country, ranking seventh by its construction activity in the sector. Between 2019 and October 2024, more than 1.8 million square feet of life science space across nine projects broke ground in the metro.

More office projects to come online

Last year, Seattle’s office sector saw the delivery of 11 properties, accounting for 4 million square feet—about 2.2 percent of the metro’s total inventory. Compared to 2023, this figure increased by more than a third.

Among gateway markets, Boston took the lead with almost 6.4 million square feet completed, while Seattle was close behind. Chicago (1.0 million square feet) and Los Angeles (955,510 square feet) were at the opposite pole.

In the second quarter of last year, Office Properties Income Trust completed the renovations of Unison Elliott Bay, a three-building, 300,000-square-foot life science lab, R&D and office space. The project began in March 2022.

In terms of pipeline, more than 5.1 million square feet of office space across 10 projects were under construction at the end of December, which will add about 2.8 percent to the market’s stock. Of them, two developments totaling 691,700 square feet broke ground in 2024.

One of the largest projects under construction that is scheduled to come online this year is Amazon’s Tower 1 at Bellevue 600. The 43-story building will comprise more than 1.1 million square feet and is the first phase of a development that is set to also include a 31-story high-rise.

Government agencies focus on office-to-residential conversions

With the trend of converting office spaces into residential units gaining momentum, CommercialEdge has launched a tool designed to evaluate the feasibility of repurposing properties across different markets. According to its Conversion Feasibility Index, Seattle ranks high, with around 4.7 million square feet of office space demonstrating strong potential for conversion.

Last summer, the Seattle City Council enacted a legislation aimed at removing regulatory obstacles by granting extensive exemptions from dimensional and design development standards. This initiative is intended to address the issue of vacant office spaces across the city, with a particular focus on the downtown area.

In August, Orton Development proposed a conversion plan for the almost 100-year-old Joseph Vance Building. If approved, the project would generate about 155 residential units. The building’s CFI score stands at 92, according to CommercialEdge, making it a strong candidate for repurposing.

Office sales register new heights

Seattle reached $599 million in office investment volume last year, almost double the figure registered in 2023. Although assets traded at an average of $260.45 per square foot, significantly surpassing the national average of $175.97, the market experienced the lowest transaction volume among gateway metros.

Manhattan registered the highest sales nationally, with $3.9 billion in assets changing hands. Washington, D.C. ($2.6 billion) and Los Angeles ($1.9 billion) trailed behind.

In September, Alexandria Real Estate Equities sold 1165 Eastlake Ave. E, a 100,086-square-foot life science building for $150 million. Fred Hutch Cancer Center acquired the asset completed in 2021. The developer also formed a joint venture with the buyer for two adjacent buildings, where it will maintain a 30 percent ownership.

A month earlier, the first skyscraper in Seattle, The Smith Tower, changed hands. A group of local investors led by GT Capital bought the 42-story property from Goldman Sachs. The 268,700-square-foot tower dates from the 1910s and was renovated in 1990s and 2010s.

Completions lead to surge in vacancy rates

Seattle’s office vacancy rate at the end of December clocked in at 26.3 percent, rising 380 basis points year-over-year. During the same month, the national average was 19.8 percent.

Among gateway markets, only San Francisco posted a higher rate, reaching 28.8 percent. Miami (15.2 percent) and Los Angeles (16.0 percent) were at the opposite end.

In one of the largest office leases in the area in recent years, Pokémon signed a 374,000-square-foot lease at Skanska’s The Eight, a 26-story mixed-use development in Bellevue, Wash. The building totals about 729,000 square feet, out of which 541,000 are destined for office use.

In June, TikTok decided to expand its office presence in the market and signed an additional 150,000-square-foot lease in downtown Bellevue, Wash. The tenant will occupy seven floors at Kemper Development’s Lincoln Square North Tower, where it had already committed to 132,000 square feet across six floors in January.

Coworking sector remains on par with national trends

As of December, Seattle’s coworking sector consisted of more than 3 million square feet, accounting for 1.9 percent of the market’s office stock. Among gateway metros, only Boston (1.8 percent) and Washington, D.C. (1.6 percent) had a smaller percentage of shared space out of total inventory, while Miami (3.8 percent) took the spotlight.

In the first quarter of last year, CENTRL Office took over the former WeWork shared space at the Kelly-Springfield Building in Seattle. The firm will operate the 53,365-square-foot space under a management contract with landlord Legacy Cos., after WeWork vacated the offices in February, filing for Chapter 11 bankruptcy.

Regus (445,380 square feet) became the largest flex office provider in the Emerald City as of December, followed by WeWork with 339,476 square feet. These operators were followed by extraSlice (296,437 square feet) and Industrious (189,675 square feet).